1. 1 Welcome to the International Right of Way Association’s Course 401 Appraisal of Partial Acquisitions 401-PT – Revision 2 – 01.20.07.CAN

2. 2 Introductions Who we are… What we do… Where we do it… How long we’ve been doing it… Our goals for the course...

3. 3 Objectives (1) At the end of the course, you will have... Reviewed the basic principles and the valuation process

4. 4 Objectives (2) At the end of the course, you will be able to... Utilise both the Before and After Rule and the Summation Method in the valuation of partial acquisitions Understand and allocate the partial acquisition compensation among its components (i.e., value of the part taken, injurious affection, special benefits to the remainder, cost to cure)

5. 5 Objectives (3) At the end of the course, you will be able to... Employ various methods to analyse and quantify the impacts of partial acquisitions on remainder properties Analyse easement acquisitions and understand better easement valuation methods

6. 6 Objectives (4) At the end of the course, you will be able to... Be better expert witnesses.

7. 7 Controlling Documents Federal and Provincial Expropriation Acts Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP)

8. 8 Housekeeping

9. 9 Schedule (1) (Day One) Review of Principles, Valuation Process and Terms Larger Parcel Introduction to the Summation Method and the Before and After Method

10. 10 Schedule (2) (Day Two) More on the Summation Method and the Before and After Method Effects on the Remainder Property Income Approach

11. 11 Schedule (3) (Day Three) Cost Approach Compensable and Non compensable Damages Benefits

12. 12 Schedule (4) (Day Four) Easements (Day Five) Litigation Open Forum Exam

13. 13 Value Principles Substitution Supply and Demand Anticipation Consistent Use Contribution

14. 14 Valuation Process Appraisal Problem Definition Scope of Work Data Collection and Description Three Approach to Value Reconciliation and Final Value Opinion Defined Value Opinion Report Land Value Opinion

15. 15 Valuation Process Appraisal Problem Definition Identification of the client, intended use, and users Value to be developed Date of the value opinion Identity and location of the subject property Property rights to be valued Limiting conditions

16. 16 Valuation Process Scope of Work Degree to which the property is inspected or identified Extent of research into physical and economic factors Extent of data research Type and extent of analysis applied to arrive at opinions or conclusions

17. 17 Valuation Process Data Collection and Description Market area data Comparable property data Subject property data

18. 18 Valuation Process Highest and Best Use The reasonably probable and legal use that is physically possible, appropriately supported, and financially feasible, and that results in the highest value. Physically possible? Legally permissible? Financially feasible? Maximally productive?

19. 19 Valuation Process Cost Approach Develop a value opinion for the land Estimate the cost new of the improvement Deduct depreciation Add land value opinion to the depreciated improvement value

20. 20 Valuation Process Direct Comparison Approach Research the market for comparable data Develop relevant units of comparison Compare the sales to the subject and adjust for dissimilarities Reconcile the value indications into a final value opinion

21. 21 Valuation Process Income Approach Estimate the subject’s annual potential gross income Determine a vacancy and collection loss Subtract the vacancy and collection loss from the potential gross income Estimate annual property expenses and subtract the expenses from the effective gross income to arrive at the net operating income Develop a capitalization rate Convert the net operating income into value

22. 22 Valuation Process Defined Value Opinion Report Narrative Short narrative Form

23. 23 Valuation Process Appraisal Problem Definition Scope of Work Data Collection and Description Three Approach to Value Reconciliation and Final Value Opinion Defined Value Opinion Report Land Value Opinion

24. 24 Terms (1) Larger parcel Before and After Method Summation Method Before value After value Value of the part taken

25. 25 Terms (2) Value of the part taken, as part of the whole Value of the remainder, as part of the whole Value of the remainder after the acquisition, disregarding special benefits Injurious affection

26. 26 Terms (3) Value of the remainder after the acquisition, considering special benefits Benefits Cost to cure Easement Due compensation

27. 27 Larger Parcel … the tract or tracts of land, which possess a unity of ownership and have the same, or an integrated, highest and best use.

28. 28 Larger Parcel “Tests” Unity of title Unity of use Contiguity or proximity

29. 29 Two Methods Summation Method Before and After Method

30. 30 Summation Method Payment is made for the value of the part taken plus (injurious affection minus special benefits to the remainder property). The amount of injurious affection minus the amount of special benefits cannot be less than zero dollars.

31. 31 Before and After Method Payment is the difference between the value before the acquisition and the value after the acquisition. No breakdown of the compensation is required and theoretically (but not practically) the market value of the acquisition could be nil. In practice, the owner must be compensated for the value of the land taken, regardless of any betterment to the remaining lands.

32. 32

33. 33 Summation Method (1) Value of the whole, before acquisition Value of the part taken, as part of the whole Value of the remainder, as part of the whole Value of the remainder after the acquisition, disregarding special benefits

34. 34 Summation Method (2) Injurious affection Value of the remainder after the acquisition, considering special benefits Special benefits to remainder Net injurious affection or net special benefits Total compensation

35. 35 Before and After Method Before value (minus) After value (equals) Total compensation

36. 36 Recap Day One

37. 37 Recap Yesterday and Look at Today

38. 38 Out of Whack? (1)

39. 39 “…$75,000 home … and a mere slice of land around the corner …just sold for $100,000.” “It causes consternation… (w)e got one appraisal at $48,000 and one at $135,000…”

40. 40 Features Affecting Land Accessibility Access Landlocking Size and Shape Frontage Topography

41. 41 Features Affecting Site Improvements Landscaping Private utilities Utilities Municipal services

42. 42 Features Affecting Building Improvements Functional utility External obsolescence

43. 43

44. 44 Income Approach Estimate the subject’s annual potential gross income Determine a vacancy and collection loss Subtract the vacancy and collection loss from the potential gross income Estimate annual property expenses and subtract the expenses from the effective gross income to arrive at the net operating income Develop a capitalization rate Convert the net operating income into value

45. 45 Reconstructed Operating Statement Potential Gross Income (minus) Vacancy and Collection Loss (equals) Effective Gross Income (minus) Operating Expenses (equals) Net Operating Income

46. 46 Rates Ro Yo

47. 47

48. 48

49. 49 Recap Day Two

50. 50 Recap Yesterday and Look at Today

51. 51 Cost Approach Develop a value opinion for the land Estimate the cost new of the improvement Deduct depreciation Add land value opinion to the depreciated improvement value

52. 52 Depreciation A loss in value from any cause. Physical deterioration Functional obsolescence External obsolescence

53. 53 Cost to Cure … the cost to restore an item to its pre acquisition state.

54. 54

55. 55

56. 56 Injurious Affection … a loss in value to the remainder property as a result of a partial acquisition.

57. 57 Benefits … an increase in value to the remainder property as a result of a partial acquisition.

58. 58 Recap Day Three

59. 59 Recap Yesterday and Look at Today

60. 60 Easement … a non possessory interest one has in the property of another for a specific purpose.

61. 61 Dominant and Servient Estates

62. 62 Valuation Concepts What the owner has lost, not what the agency has gained Unit Rule Remainders (The 3 “Rs”)

63. 63 Remainders (The “3Rs”) (1) Remnant Residual Remainder

64. 64 Remainders (The “3 Rs”) (2) Easement 1 2 3

65. 65 Remainders (The “3 Rs”) (3) Easement Remnant Residual Remainder 1 2 3

66. 66 Easement Information Sources Easement document Statutes and Case law Custom and Usage Market perceptions

67. 67 Market Perceptions “Property owners…are due compensation, even if the ‘cancerphobia’ driving down the worth of their land is unjustified or irrational…”

68. 68 Valuation Considerations Nature of the easement Rights taken Applicable laws Characteristics affecting value Easement effects

69. 69 Estates Dominant estate is the property benefited by the easement. Servient estate is the property burdened by the easement.

70. 70 Easement Categories Sub surface easement Surface easement Overhead easement

71. 71 1

72. 72 2

73. 73 93

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75. 75 5

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78. 78 8

79. 79 9

80. 80 10

81. 81 411

82. 82 Temporary Easement … an easement that is for a limited duration.

83. 83 Recap Day Four

84. 84 Recap Yesterday and Look at Today

85. 85 Expert Witness … is an individual qualified by knowledge, skill, experience, training and education to testify in a legal proceeding.

86. 86 The 3 “Cs” Communication skills Competence Competitiveness

87. 87 Litigation Contexts Pre trial conferences Discovery Trials

88. 88 Discovery … the techniques and procedures by which each attorney obtains information from the opposing party, witnesses and other parties. Discovery includes written interrogatories and depositions.

89. 89 Open Forum

90. 90 Objectives (1) You have... Reviewed the basic principles and the valuation process

91. 91 Objectives (2) Right now, you are able to... Utilize both the Before and After Method and the Summation Method in the valuation of partial acquisitions.

92. 92 Objectives (3) Right now, you are able to... Understand and allocate the partial acquisition compensation among its components (i.e., value of the part taken, injurious affection, special benefits to the remainder, cost to cure).

93. 93 Objectives (4) Right now, you are able to... Employ various methods to analyse and quantify the impacts of partial acquisitions on remainder properties. Analyse easement acquisitions and understand better easement valuation methods.

94. 94 Objectives (5) Right now, you should Be better expert witnesses.

95. 95 Thank you! 401-PT – Revision 2 – 01.20.07.CAN